What Are Combo Loans?
Combo Loans. The Alternatives to PMI
There are other ways to buy real estate with less than 20% down, and not have to pay mortgage
insurance. These are called Combo Loans, and involve a 1st and 2nd mortgage. The 1st
mortgage is for 80% of the sales price, and because it is at 80% there is no PMI required. The 2nd
mortgage makes up the difference between the sales price, the 1st mortgage amount, and your
down payment.
For example, If you have a 5% down payment, it would look like this:
$200,000 = Sales Price, minus
$160,000 = 80% 1st Mortgage Amount, minus
$ 10,000 = 5% Down Payment
-------------
$ 30,000 = 15% as a 2nd Mortgage Amount
This Combo Loan is known as an "80/15/5" because the 1st mortgage is for 80% of the sales
price, the 2nd mortgage is for 15% of the sales price, and the buyer is putting 5% as a down
payment.
Other combinations are the "80/10/10", where the buyer makes a 10% down payment, and the
"80/20", where 100% of the sales price is financed by the 1st and 2nd mortgages, and the buyer
gets Zero Down Payment financing.
back to FAQ
Combo Loans. The Alternatives to PMI
There are other ways to buy real estate with less than 20% down, and not have to pay mortgage
insurance. These are called Combo Loans, and involve a 1st and 2nd mortgage. The 1st
mortgage is for 80% of the sales price, and because it is at 80% there is no PMI required. The 2nd
mortgage makes up the difference between the sales price, the 1st mortgage amount, and your
down payment.
For example, If you have a 5% down payment, it would look like this:
$200,000 = Sales Price, minus
$160,000 = 80% 1st Mortgage Amount, minus
$ 10,000 = 5% Down Payment
-------------
$ 30,000 = 15% as a 2nd Mortgage Amount
This Combo Loan is known as an "80/15/5" because the 1st mortgage is for 80% of the sales
price, the 2nd mortgage is for 15% of the sales price, and the buyer is putting 5% as a down
payment.
Other combinations are the "80/10/10", where the buyer makes a 10% down payment, and the
"80/20", where 100% of the sales price is financed by the 1st and 2nd mortgages, and the buyer
gets Zero Down Payment financing.
back to FAQ
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